Unit 1 Test Flashcards
Give the etymology of the word “economy”
Comes from the greek work “one who manages a household”
Define scarcity
Economic concept that society has limited resources and therefore cannot produce all the goods and services people wish to have
Define economics
Study of how society manages its scarce resources.
What is the difference between micro and macroeconomics?
Micro- study of individuals and business decisions
Macro- the study of decisions of countries and governments
what are the 3 basic things economists look at?
1) Decisions of people
2) How people interact
3) Trends that affect the economy as a whole
Explain concept of “No such thing as free lunch”
You cannot get something for free because resources are limited. someone is paying to produce it.
What are the basic questions of economics?
- WHAT to produce?
- HOW to produce it?
- FOR WHOM to produce?
Explain guns vs butter
“Guns and Butter” describes the government allocation to defense spending versus social programs.
Name the 4 factors of production
- Land
- Capital
- Labor
- Entrepreneurs
What makes up “capital”
tools, equipment, machinery and factories
What factors affect labor as a factor of production?
Birthrates, immigration, famine, war, and disease
What are the four reasons economics is a social science?
- Description
- Analysis
- Explanation
- Prediction
Explain the difference between a capital and a consumer good
-Capital Good: a manufactured good used to produce other goods. EX: a machine at a factory, or a
deep fryer at a fast food restaurant
-Consumer Good: a good intended for final use
Explain the difference between a durable and nondurable good.
-Durable Good: any good that last three years or more when used on a regular basis
- an item that lasts for fewer than three years when used on a regular basis
What word best describes a service?
intangible
Give a basic description of “consumers.”
The people who use goods/services to satisfy wants/needs.
Explain concepts around value (Paradox of Value)
-Value (def): the worth that can be expressed in dollars and cents.
* Basic Question: Why do certain things have more value than others?
* Def: the apparent contradiction between the high monetary value of a nonessential item
and the low value of an essential item.
What important person conceptualized the paradox of value?
- The concept was first developed by Scottish social philosopher Adam Smith
Give important notes on the concept of “utility.”
-Utility (def): the capacity for a good or service to be useful and provide satisfaction to someone (for
something to have value, it must have utility)
What gives something “monetary value?”
For something to have monetary value, it must be scarce and have utility.
Explain the economic view of “wealth.”
the accumulation of products that are tangible, scarce,
useful, and transferable from one person to another.
Give important notes on the important book The Wealth of Nations
The Wealth of Nations) in
1776, he cited the abilities and skills of a nation’s people as its true wealth. He argued that if
a nations tangible material wealth was taken away, a nation’s people could restore it—but if
a nation’s people was taken away, its wealth would disappear
Give a quick definition of a market.
a location or other mechanism that allows buyers and sellers to exchange a specific product.
Explain the difference between the Factor Market and the Product Market.
-Markets where the factors of production are bought and sold
-Product Markets: Markets where goods and services are bought.
Be able to identify a diagram of the “Circular Flow of Economic Activity.”
product market-individuals-factor markets-businesses
Give important notes on productivity.
Productivity (def): the measure of the amount of output produced with a given amount of productive
factors
Productivity is most often associated with labor, but applies to all factors of production
Define Human Capital.
The sum of people’s skills, abilities, health, knowledge and motivation,
contributions to human capital greatly improve human capital.
Give examples of how entities can invest in Human Capital.
by providing education and health care, while
businesses can invest in training and other programs that improve the skills of their
workers. And individuals can invest in their own education by completing different levels
of school.
Give details on the concept of the “division of labor.”
Define specialization.
What American is most associated with “specialization.”
Explain the industrial concept of the “assembly line.”
Explain the US and economic interdependence.
Define Trade-Offs.
Define Opportunity Costs.
Give details on the economic concept of the Production Possibilities Frontier.
- Be able to identify a Production Possibilities Frontier diagram.
Beyond scarcity, name issues that are studied under economics.
Give details of the Free Enterprise System.
Explain the concept of “standard of living.
